The Government of India has revised the GST rates for several items under the Ministry of Heavy Industries, effective September 22, 2025. This move aims to simplify the tax structure and boost economic growth.
Here’s a breakdown of the key changes:
Automobiles
- Bikes (up to 350cc) and Small Cars now have a lower GST rate of 18%, down from 28%. This makes vehicles more affordable for first-time buyers and those in rural and semi-urban areas.
- Large Cars and SUVs have a flat 40% GST rate with no additional cess. This simplifies the tax structure and makes these vehicles more accessible to buyers while allowing manufacturers to fully claim Input Tax Credit (ITC).
- Buses and Commercial Goods Vehicles (trucks, delivery vans) have also been reduced from 28% to 18%. This lowers logistics costs, which can help reduce inflation and improve export competitiveness.
Tractors
- GST on tractors (under 1800cc) has been cut from 12% to 5%.
- Tractor parts are also taxed at 5%. This will make farming equipment more affordable and boost the agriculture sector.
These rate cuts are expected to create a multiplier effect across the economy. Lower prices will drive demand, benefiting automobile manufacturers and the vast ancillary industry that supplies them. This, in turn, will lead to new job opportunities, support retail loan growth, and promote a cleaner environment by encouraging the replacement of older vehicles.
Additionally, most auto components now have a uniform GST rate of 18%. Services for goods and passenger transportation have been rationalized, giving businesses the choice between a 5% rate (without ITC) or an 18% rate (with full ITC).